Nect IMP trial to be Rougher
Herbruck makes gains in first round. In months, Vertucci faces allegations of securities violations
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BY GLENN GAMBOA AND ROGER J. MEZGER
Beacon Journal business writers
May 4, 1997
In his first battle with his former boss and business partner, P. Joseph Vertucci, Richard L. Herbruck got basically everything he wanted.
A six-woman, two-man Summit County Common Pleas jury last week gave him $101,622.75 -- 75 percent of the back wages he claimed Vertucci owed him, as well as some legal penalties. The jury also dismissed Vertucci's counterclaims, which included charges of embezzlement and breach of contract, against Herbruck.
In-court negotiations last week settled other issues -- including the all-important issue of Herbruck's ownership of 25 percent of Alive Centers of America Inc. stock in early 1995.
"The 25 percent (of Alive Centers) as it stands right now is worthless," said V. Scott Macom, Vertucci's attorney, in completing the agreement. "Alive is dead."
Alive Centers, which designed and marketed educational videodiscs, may be dead -- or "now dormant," as Vertucci terms it. But the controversy surrounding it is still kicking.
And the agreement that Herbruck once had a major stake in Alive Centers sets the stage for Round Two.
Round Two could involve big money, as well as big trouble.
The remaining part of the Herbruck-Vertucci dispute, which has not yet been set for trial, already has drawn the attention of federal investigators -- including those from the U.S. Securities and Exchange Commission who are looking into the activities of Vertucci and others in a successor company to Alive, Interactive MultiMedia Publishers Inc.
Sources close to the probe say federal investigators have already subpoenaed evidence in the case as well as questioned key witnesses.
IMP was a Wall Street darling last year when its stock value skyrocketed 1,300 percent. That gave the interactive computer kiosk company, once headquartered in the basement of a Highland Square high-rise, a market capitalization of $40 million, about 400 times its sales for the previous quarter.
Stock price plummeted
SEC investigators began looking into the activities of Vertucci and IMP after the stock began a spectacular free-fall.
Unlike the first trial, where Vertucci and Herbruck were, more or less, equally on trial, the next case will focus on Vertucci.
It will also focus on a simple question: Where is the money?
The answer to that question, however, will likely not be simple.
Vertucci says the money is gone, lost to unscrupulous traders and the fickleness of Wall Street.
Others, Herbruck included, aren't so sure.
Filings and evidence in the case allude to an alleged conspiracy by IMP insiders to manipulate the company's stock price, to forge documents and to other possible securities law violations.
They also allude to one insider's possible mob connections -- a touchy subject on Wall Street these days, in light of a congressional inquiry and an investigation by the National Association of Securities Dealers into organized crime in the stock markets.
The NASD already has told a congressional subcommittee investigating organized crime in the stock markets that one of Vertucci's co-defendants in the second trial, La Jolla Capital Corp., faces disciplinary action for its trading practices.
The second trial, set to begin Sept. 22, promises to be far more complex than the three-day trial concluded last week.
However, R. Scott Haley, who represents Herbruck in the trials, said he is looking forward to the next phase.
"We are ready to go on," he said.
Macom, who stepped in to represent Vertucci midway through the trial, said he expects to represent Vertucci in the next trial. Vertucci had been representing himself in the case for months after his previous attorneys walked away for non-payment.
Legal advice needed
Vertucci, who has a doctorate in educational administration, said he hired Macom after the first day's proceedings because he did not have the know-how to get his evidence properly entered into the trial.
Vertucci and Herbruck both declined comment after the jury's verdict.
In his closing statement, Macom said Vertucci avoided firing Herbruck -- whom Vertucci accused of stealing from his company -- because Vertucci did not want the conflict.
"Mr. Vertucci is a good and peaceful man," Macom said.
However, Vertucci never filed any charges against Herbruck, and no witnesses were called at the trial to back up Vertucci's claims. Vertucci's former accountant testified that no funds were ever missing.
Those close to Herbruck said the retired IBM Corp. manager felt he got a bonus from the trial by being able to clear that charge from his name.
He also got to answer The Question.
People were always asking Herbruck why he got involved with Vertucci and Alive Centers. More important, people wanted to know why he stayed.
Herbruck testified that within months he knew Vertucci was very much in debt and that he had a knack for spending money, even money that may have belonged to the company.
Yet for more than four years, Herbruck not only stayed; he proceeded to lend the company $188,000 of his own money.
Finally, during the trial, he got to explain himself publicly.
When Macom asked The Question, Herbruck, who had been relatively subdued in his testimony, lit up.
"I'm glad you asked," he said to Macom.
"I stayed because he was the only game in town," he said. "
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